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CHAPTER-03

ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Dr. Gehan Shanmuganathan, (DBA)

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NESTLE INDIA AND SOCIAL RESPONSIBILITY…..

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NESTLE INDIA AND SOCIAL RESPONSIBILITY….. Vested in solving nation’s water problem while producing its

products locally Nestle cater to Indian market with milk products, prepared

dishes, cooking aids, and some beverages that are staples to Indian consumers

The company has introduced a water education program, bored wells for nearly 100 village schools for children and teaches hygiene programs

Nestle wants to create value for its shareholders and generate long-term values for society

Social responsibility leads to long term profits through corporate brand equity

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OBJECTIVES

1 Identify the philosophical principles behind business ethics.2 Explain how values relate to ethics.3 Identify factors contributing to lax ethics and common ethical

temptations.4 Apply a guide to ethical decision making.5 Describe the stakeholder viewpoint of social responsibility and

corporate social performance.6 Present an overview of social-responsibility initiatives.7 Summarize how managers can create an environment that

fosters ethically and socially responsible behavior and the benefits of such activity

CHAPTER OBJECTIVES…

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BUSINESS ETHICS

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DEFINITION Business Ethics is the study of right and

wrong and off the morality of the choices individuals make. An ethical decision or an action is one that is right according to some standard of behavior. Business ethics is duplication of moral standards to business situations.

Ethics is the study of moral obligation, or separating right from wrong

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WHAT RESEARCH FINDINGS SAY… Ethics is subjective- head-on advertising in the US Customers, suppliers, and employees prefer to deal with

ethical companies Majority of full-time workers said that it is critical to

work for an organization that is ethical More than one in three workers said they have left a job

because of ethical misconduct by fellow employees or managers

82% of workers said they would like to receive less pay if they worked for an ethical company

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MORAL INTENSITY The magnitude of an unethical act

A person might behave unethically if the magnitude of the consequence is low and versa vice-versa

Manager’s plagiarism on someone’s speech or unauthorized copy of software could be considered as ethical

Same manager might hesitate to sexually harass a business intern

The social consensus- degree of peer agreement One would be hesitant to engage in an act if his or her peers

think it is unethical

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PHILOSOPHICAL PRINCIPLES UNDERLYING BUSINESS ETHICS

PHILOSOPHICAL PRINCIPLES OF BUSINESS ETHICS

When attempting to decide what is right and wrong, managers can focus on:

Consequences - If no one gets hurt, the decision is ethical.Duties, obligations, and principles - If a decision violates a universal principle, it is unethical.Integrity - If the person in question has good character, a genuine motivation and intention.

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Cognitive area-Pertinent

Experiencestimulus Perception attitude

PSYCHOLOGICAL BASIS FOR ETHICAL BEHAVIOR

First, second, and third hand experiences

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SOME CONCEPTS UNDER CONSEQUENCES BASED ETHICALITY Pragmatism

focusing on consequences “the belief is that there are no absolute principles or standards, and no objective truth and no objective reality”

“The reality is whatever that works” E.g- Bernard L.Madoff the former Nasdaq chairman

thought that lying to customers was pragmatic Utilitarianism

The utility of the decision The net balance of good consequences verses bad

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VALUES AND ETHICS

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VALUES AND ETHICS Values are closely related to ethics Values are clear statements of what is critically

important Ethics become the vehicle for converting

values into actions E.g- we put people before profits (value) Avoiding delay payments to employees, and suppliers Excellent customer service (value) and infrastructure

for performance

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VALUES AND ETHICAL BEHAVIOR

Values Ethical Behavior

Competitive Advantage

Quality Customer serviceEcological consciousness Social responsibility Cost consciousness Teamwork

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SOURCES OF UNETHICAL DECISIONS AND BEHAVIOR

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RESEARCH REVEALS (SURVEY OF 2852) Lying to employees (19%) Engaging in conflicts of interest (16%) Lying to outside stakeholders (12%) Engaging in health and safety violations

(11%) Producing poor product quality (9%) Stealing (9%) Sexual harassment (7%)

FACTORS CONTRIBUTING TO ETHICAL PROBLEMS

An individual’s desire to maximize self-gain at the expense of others

An organizational atmosphere that condones unethical behavior

Moral laxity - slippage in moral behavior because other issues seem more important

Pressure from higher management to achieve organizational goals

Strength of relationships among people

4.3

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ETHICAL TEMPTATIONS AND VIOLATIONS

ETHICAL TEMPTATIONS AND VIOLATIONS

Accepting bribes for

doing business

with other companies

Misuse of corporate resources

Divulging confidential information Conflict of

interest

Stealing from

employers & customers

Illegally copying software

Treating people unfairly

4.4

Sexual harassment

Corporate espionage

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BUSINESS SCANDALS AS ETHICAL VIOLATIONS

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BUSINESS SCANDALS AS ETHICAL VIOLATIONS Internet fraud Identity theft Work-at-home (such as making you as an agent

for transferring funds received from customers) Consequences of these scandals are,

Job losses Wiping out pension funds Investments losses Bankruptcy

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A GUIDE TO ETHICAL DECISION MAKING

A GUIDE TO ETHICAL DECISION MAKING

1 Is it right?2 Is it fair?3 Who gets hurt?4 Would you be comfortable if the details of

your decision were reported on the front page of your newspaper or throughout the company?

4 Would you tell your child to do it?6 How does it smell? Based on intuition

4.5

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CORPORATE SOCIAL RESPONSIBILITY

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CORPORATE SOCIAL RESPONSIBILITY

The idea that firms have obligations to

society beyond their economic

obligations to owners or stockholders

and also beyond those prescribed by

law or contract

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THREE COMPONENTS OF SOCIAL RESPONSIBILITY Cognitive component

Thinking about the organization’s relationships with its parties at interest

Linguistic component Explaining the organization’s reasons for engaging in certain

activities and how it goes about sharing these explanations with others

Conative component What the firm actually does along with the commitment and

consistency it shows in conducting its acts of social responsibilities

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STOCKHOLDER VERSUS STAKEHOLDER VIEWPOINTS

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STOCKHOLDER VERSUS STAKEHOLDER VIEWPOINTS Stockholder

viewpoint

The traditional perspective on social responsibility that a business organization is responsible only to its owners and stockholders

Stakeholder viewpoint

The viewpoint of social responsibility contending that firms must hold themselves responsible for the quality of life of the many groups affected by the firm’s actions

THE STAKEHOLDER VIEWPOINT OF SOCIAL RESPONSIBILITY

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The Organizatio

n

OwnersStockholdersEmployeesBoard of Directors

CustomersSuppliersCreditorsLabor UnionsCompetitorsSpecial Interest GroupsCustomer GroupsGovernment AgenciesFinancial Institutions

Adapted from Exhibit 4.4

Inte

rnal

St

akeh

olde

rs

Exte

rnal

St

akeh

olde

rs

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CORPORATE SOCIAL PERFORMANCE

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CORPORATE SOCIAL PERFORMANCE The extent to which a firm responds to the

demands of its stakeholders for behaving in a socially responsible manner

Discuss how Wal-Mart controls its supplies in order to achieve their cost advantage as an irresponsible corporate citizen in performing its social responsibility (lay-offs of employees of suppliers) discuss the bargaining power of Wal-Mart

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CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Compassionate Downsizing

Work/Life Programs

Acceptance of Whistle Blowers

Creating opportunities

for Diverse

workforce

Social Responsibility

Initiatives

Environmental Management

Community Redevelopment

Projects

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CORPORATE SOCIAL RESPONSIBILITY INITIATIVES Philanthropy

Donate money to charity and other various causes Work/Life Programs

Programs that the employees could balance the demands of work and personal life

Community Redevelopment Project Investing on rebuild distressed communities

Acceptance of Whistle-Blowers Employees who disclose organizational wrongdoing

to parties who could take actions Compassionate Downsizing

Controlling the downsizing to the minimum level Opportunities for diverse workforce

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ENVIRONMENTAL PROTECTION

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ENVIRONMENTAL PROTECTION Environmental protection is a concern the

organization have in managing sustainable environment or “going green”

Going green is an approach to defining and creating processes that are Environmentally friendly Economically viable Pragmatic in the long run

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SOME METHODS TO MANAGE Commit to lowering carbon dioxide and other

hazardous emissions

Developing green supply chain

Make sustainability and eco-friendly policies in the

business plan

Implement four-day workweek

Manufacture and sell products with recycled materials

Invest heavily in recycling

Plant a rooftop garden on your office building or factory

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CREATING AN ETHICAL AND SOCIALLY RESPONSIBLE WORKPLACE

CREATING AN ETHICAL ANDSOCIALLY RESPONSIBLE WORK PLACE

4.8

Create formal mechanisms to monitor ethics

Provide written codes of conduct

Offer training programs

Confront ethical

deviations

Lead by example

Talk about the issues

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BENEFITS DERIVED FROM ETHICS AND SOCIAL RESPONSIBILITY

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VIRTUOUS CIRCLE The relationship between investment on

social responsible projects and financial performance where corporate social performance and corporate financial performance feed and reinforce each other

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VIRTUOUS CIRCLE

Investments onSocially responsible Projects

Financial Performance

1 Identify the philosophical principles behind business ethics.2 Explain how values relate to ethics.3 Identify factors contributing to lax ethics and common ethical

temptations.4 Apply a guide to ethical decision making.5 Describe the stakeholder viewpoint of social responsibility and

corporate social performance.6 Present an overview of social-responsibility initiatives.7 Summarize how managers can create an environment fosters

ethically and socially responsible behavior and the benefits of such activity

WHAT WE LEARNED….

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QUESTIONS…….

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WRITE FIVE KEY THINGS (AREAS) THAT YOU CAN CRITICALLY REMEMBER IN TODAY’S DISCUSSION

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WEEKLY ASSIGNMENT- 03

“Organizations have to be much

profit oriented than being socially

responsible, especially during an

economic depression”. Do you

agree or disagree? Discuss.